By the 1920s Henry Ford and the “assembly line,” and Frederick W. Taylor (a Philadelphia native) and his “efficiency studies” had helped to create a remarkably efficient, productive, and expansive American economy.  Both men tried to break jobs down into the simplest tasks, then train workers to specialize in the best way of doing that task.  Intense specialization combined with close supervision by management would allow the production of immense quantities of goods at a very low cost for each unit produced.  Low costs would allow the goods to be sold at low prices; low prices would allow lots more things to be sold while maintaining a good profit rate; the sale of lots of stuff at a high profit would allow employers to pay higher wages; people who got higher wages would use them to buy more stuff.  Everybody would be a winner and nobody would need unions or disruptions of production.  This worked like a dream.  American industry adopted this system during the first two decades of the 20^th Century.  Profits soared, but real wages also advanced tremendously.  The American system—often called “Fordism” or “Taylorism” in other parts of the world—spread around the globe.  One place where it received the most enthusiastic reception appears to have been in the Soviet Union, where Stalin’s Five Year Plans to turn the country into an industrial super-power seems to have owed much to American example.  So long as the American economy went on expanding, it imported goods from all over the world.  America served as the locomotive pulling the rest of the world along toward prosperity. 

            There were two problems with the prosperity of the Twenties.  First, workers hated the dehumanized, speeded-up nature of work (although they were glad to take the higher wages).  They felt that they were being turned into mere extensions of the machines they operated.    

          Second, there were big imbalances inside the economy, both in the United States and elsewhere.  Even before the First World War the huge volume of agricultural goods and raw materials tended to exceed demand and to hold down prices paid to farmers, miners, loggers, etc.  American farmers on the Great Plains tended to blame the faceless, soulless railroads and big corporations back East for rigging the economy against the ordinary working man, farmer, and small businessman.  During the First World War there had been a huge increase in the volume of goods produced all over the world to make up for all the stuff Europeans were not making because they were busy blowing each other up.  Many people borrowed money from banks to expand their production of goods then in high demand.  After the war ended, everybody was still producing too much stuff for the world to consume.  Prices for farm goods (especially wheat, corn, cotton) and minerals (especially coal and oil) trended downward throughout the Twenties.  But people still had to pay back the loans they had taken out when prices were high.  To get the same amount of money, they had to produce even more of what it is they were making.  Production went on rising when it should have been cut back.  In 1920 half of Americans lived in small towns that depended on farming or mining or cattle raising.  People who depended on farms or mining just didn’t have the money to buy all the neat stuff being churned out by modern industry.  What was true in America was true everywhere else.  This was a train-wreck waiting to happen. 

            How would governments respond if the economy suddenly entered a downturn?  Standard economic theory of the time (see: “Economic Ideas”) said to let the system automatically correct for previous errors.  Cut taxes, cut spending and everything will be fine.